Web 3.0 promises to have a profound impact on the way everyone does everything as everything becomes tokenized. The first harbinger of this revolution is the passion for Art NFTs. There is more to a collecting than meets the eye, especially for Art NFTs. Not only are there very personal reasons for collecting, there are unanswered issues on the way NFTs are handled for tax purposes as well as their meaning in a cultural context. This is a whole new world for estate planning.
Why will people acquire Art NFTs? Although the promise of instant wealth and fame is always alluring, the current popularity of collecting Art NFTs reflects modern anxieties about capitalist consumer culture. The idea that eventually all digital images, no matter how ephemeral or mundane, will become valuable and collectible seems to make consumerism more meaningful. The result is that people will buy Art NFTs not simply as a consumer but as a collector.
People will collect Art NFTs for all kinds of reasons. Some will collect in a way that instructs us about the nature of the world, Some will collect in a way that reflects a sense of nostalgia of a lost childhood Some will collect to represent fantasy worlds, lost worlds or worlds distant in time and space. Collecting is a narrative process, objects become symbols and require a collector to narrate its meaning. Some collections will become sites of familial and cultural memory. By collecting people will be able to continually negotiate their relationship with the actual and virtual world as it is shaped by new technology. Indeed, Web 3.0 will lend itself to collecting. It is a quintessentially interior action and digital assets will be taken out of circulation and brought “inside” the blockchain based on its relationship to the collector and the collection. Look, therefore, for the spectacular sales of NFTs to be replaced by the sale of access to virtual collections though Ticket NFTs as the main source of gain.
As virtual collections of digital assets develop, so will the interplay of the virtual and physical spaces where they are displayed. As data registered on the blockchain and tokenized, the smart contracts will define what is public information, what is agreed upon information on a consensus ledger, and what is private information and kept secret. Art NFTs now mathematically enforce what is public and what is private, what is domestic and what is not, and how the display of collected NFTs reference the creator, the collector, inside your virtual home and the digital world outside.
Expect to see similar inquiries into Art NFTs as are raised about the political nature of art collecting. Does the collecting process permit (or even encourages) a kind of objectification or "othering" of humans? When the digital image stops being defined by its function, that is a virtual record of an object, event or creative idea, its meaning is entirely up to the person viewing the object. The result is that all objects in a collection have one common denominator, that is the passionate abstraction called possession. The result is that the collection becomes more valuable than the sum of its parts, and to preserve this value, specialized planning is required, adapted to the challenges of the swiftly changing environment which is becoming web 3.0.
Planning for Art NFT Collectors requires an understanding both of the Art market and the Art NFT market. This includes how people behave when collecting, the advisory process for collectors, the specialized aspects of managing digital assets, the tax and non-tax issues involved in transferring ownership and control of Art NFTs, the income taxation of Art NFT transactions, gifting NFTs and planning the sale of NFTs either individually or as a collection.
People will collect Art NFTs and those NFTs will endure beyond their lifetime. This is a new world and one that has unknown risks. Planning for owners of NFTs requires both expertise in estate planning and expertise in managing digital assets. We have the first and are working on getting the second.